Increased Municipal Utility Formation the Goal of Legislation in Massachusetts

Date: 10 Oct 2005 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

In an effort to clarify and strengthen state law, lawmakers in Massachusetts have introduced legislation to enhance the ability of communities to acquire electric distribution equipment from investor-owned utilities in order to form municipally-owned electric companies.

The bill (H3294) spearheaded by Rep. Jay Kaufman, would remove from state law a clause that effectively defends utilities from municipal takeover. The new legislation would require power companies to sell local distribution system assets to cities and towns once a fair price has been determined. H3294 also creates a review process for the economics of new municipal utilities and set limits of 3 per year that can be formed. Supporters of the new language say that the current law allows investor-owned utilities, such as NStar, to reject reasonable offers to purchase their distribution system assets.

The bill directs cities that vote to establish a municipal utility to first try to negotiate directly with the investor-owned utility. If a price is not agreed upon after 150 days, the city can request that the state Department of Telecommunications and Energy to review the public interest aspects and feasibility of the sale. The Department is directed to issue its findings within 6 months and those may include what price the community should pay for the utility’s assets.

There are currently 41 municipally-owned utilities in Massachusetts serving 15 percent of the state’s electric customers. No new city-owned utilities have formed in Massachusetts since 1926.

Chief arguments from supporters is that municipally-owned utilities will provide better service and cleaner power at lower costs. One group, the Massachusetts Alliance for Municipal Electric Choice, says that municipal rates are 24 percent lower on average than private utilities.


John Farrell
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John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.